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Archive for February, 2018

March 17 corn closed down ½ at $3.66 ¼ and July 18 closed down ¼ at $3.82 ¼. March soybeans closed up 4 ¼ at $10.36 ¼ and July closed up 3 ½ at $10.56. March wheat closed up 1 at $4.52 ¼ and July 18 closed unchanged at $4.79. Crude oil closed up $.81 at $63.41.

FOR THE WEEK ENDED 2-23-18

CORN – March corn challenged the $3.70 level this week, but was unable to push any higher. Both May and December corn posted key reversals lower on the charts when trading resumed after President’s Day. In the May contract, $3.78 per bushel was the stumbling block. The contract high in May corn is $4.31 ¾ set all the way back in July 2016. The high for this contract in 2017 was $4.30 per bushel, hit in July 2017. The news in this holiday-shortened week was essentially the same as it has been for weeks. Traders are taking their cues from every weather forecast for South America. Lately, the crop estimates have been declining due to dryness in Argentina and excess moisture in Brazil. In Brazil, the concern is safrinha corn acres won’t get planted in a timely fashion, or at all, due to a delayed soybean harvest. The Rosario Grain Exchange slashed their Argentine corn estimate 5 mmt to 35 mmt. The USDA is carrying their crop at 39 mmt. The Buenos Aires Grain Exchange is slightly higher than the Rosario number at 37 mmt. The IGC lowered their Brazilian corn crop projection from 90.2 mmt to 87.5 mmt. Safras has Brazil’s corn crop slated at 89.5 mmt. The USDA has Brazil’s corn at 95 mmt. Brazil’s first corn harvest was 25% complete as of February 16th versus 24% complete last year. The safrinha corn crop was 33% planted, well below last year’s 50% complete pace.

The USDA Ag Forum this week indicated their non-survey forecast for 2018/2019 corn acreage at 90 million acres. The actual acreage survey will be taken March 1-15. This is just a minimal drop from last year’s 90.2 million planted acres. Private traders are anticipating 89.9 million acres to be planted to corn this spring. The USDA expects a crop production of 14.39 billion bushels using a 174.0 BPA yield. 2018/2019 ending stocks were pegged at 2.272 billion bushels versus this year’s 2.352 billion bushels. Their average farm price came in at $3.40 per bushel versus $3.30 this year. The USDA Ag Forum carryout prediction has been below the final number in 6 out of the last 11 years. Nothing from these numbers got the market excited.

Weekly export sales were fabulous at 61.2 million bushels and above expectations. With total commitments at 1.5 billion bushels, we are only 12% behind last year. The USDA is anticipating a 10.5% decline in year on year exports, so we are gaining ground. The USDA’s 2.05-billion-bushel export number looks realistic. Weekly ethanol production rose 52,000 barrels per day to 1.068 million bpd. Stocks were down 100,000 barrels to 22.8 million barrels. Crush margins were unchanged week/week at 18 cents per gallon. Gasoline demand over the past four weeks has averaged 5.4% higher than a year ago.

OUTLOOK: Corn continues to be well supported by good demand and concerns over South American crops. The USDA Ag Forum’s outlook for a slightly lower year/year carryout number was slightly supportive. Limiting the upside would be ample world stocks, including in the US. For the week, March corn fell 1 ¼ cents to $3.66 ¼, July was off ½ cent at $3.82 ¼, and December corn gained ¼ cent at $3.97 ¼ per bushel. The March contract did put in a fresh high for the move early in the week at $3.70 per bushel. This will be the next upside resistance level. March corn has traded between $3.64 ¼ to $3.70 since February 12th. At this time, it feels like a pretty comfortable range.

SOYBEANS – Traders haven’t tired of that call yet, as was shown again this week with another upswing in prices. Is the contract high of $10.50 ½ in March soybeans in the crosshairs? As February closes, we’ll be switching to the May contract for key points. The contract high in the May soybeans is $10.53 per bushel, set last July.

The USDA’s Ag Forum put 2018/2019 planted acreage at 90 million acres. This is a small decrease from last year’s 90.1 million acres, and lower than private trade estimates for 90.6 million planted acres. On the 2018/2019 balance sheet, they predicted production at 4.32 billion bushels when a 48.5 BPA yield is factored in. Carryout for 2018/2019 was projected at 460 million bushels, down from this year’s 530-million-bushel estimate. They pegged the average farm price for soybeans at $9.25 per bushel versus $9.30 this year. The USDA’s Ag Forum soybean carryout number has been higher than the final figure in 9 out of the last 11 years by an average of 136 million bushels.

The production forecasts for Argentina continue to shrink. This week, the Rosario Grain Exchange cut their bean estimate 5.5 mmt to 46.5 mmt. This compares to the USDA’s 54 mmt projection (which no one really believes is accurate). The BAGE is at 47 mmt and Agroconsult is at 49 mmt. The trade is likely factoring in a 47-48 mmt number. In Brazil, Safras & Mercado is predicting a record 115.6 mmt soybean crop. AgRural is even more optimistic with a 116.2 mmt expectation. But Agroconsult takes the prize with a 117.5 mmt outlook! The USDA’s latest Brazilian number is 112 mmt. Brazil’s soybean harvest was 16% complete as of February 16th. The average pace is 20% complete.

Weekly export sales were unexpected with net cancellations of 4 million bushels. China cancelled 13.3 million bushels, with other smaller cancellations coming from unknown. We are back to being 14% behind last year on total commitments. We have sold 1.6 billion bushels and the USDA is forecasting exports of 2.1 billion bushels, just a 3.5% decline year/year. We need to average an impressive 17.2 million bushels per week of sales to hit the USDA’s target. This would be an increase of 56% from last year’s March to August exports. Are we looking at the possibility that ending stocks this year could be north of 600 million bushels? Argentina’s truckers are back on strike, blocking roads and limiting soybeans access to ports. If this is a short-lived strike, we shouldn’t feel any long-term effects to shipments. They are protesting lower heating and gas subsidies, among other things. It’s a possibility the strike could continue into harvest season. Argentina’s soybean harvest usually begins the third or fourth week of March and hits the 50% mark the beginning of May.

OUTLOOK: November soybeans posted a new contract high this week at $10.32 ½ per bushel, as did March meal at $385.50 per ton. An underlying attitude of “buy breaks” has served the soybean bull well. This week, March soybeans jumped 14 ¾ cents higher to settle at $10.36 ¼, July rallied 13 ¾ cents to $10.56, and November beans settled 6 cents higher at $10.28 per bushel. The balancing act between how small Argentina’s bean crop may be and how large Brazil’s bean crop could be has not been resolved; however, traders are focusing on the problems and continue to add to their net long position. Dismal demand for US soybeans and a tremendous 2017/2018 carryout have been designated as tier two news. How high do we need to go to have factored in South American crop losses? Good question, and one that hasn’t been answered yet. The next target for March soybeans may be their contract high of $10.50 ½ per bushel, set last July. But be prepared for a swift reversal if crop conditions change.

Wheat

Russian ag consultancy IKAR has increased their estimate of Russian wheat exports to 37.5 million tons. The USDA recently raised their estimate to 36 million tons. Russia is now the world’s biggest wheat exporter and that gap is increasing. Some of the dryer areas in the Southern Plains are going to get much need precip in the form of either snow or rain. This should help out the winter wheat crop and pasture areas a lot.

March 17 corn closed down 2 at $3.65 ½ and July 18 closed down 1 ¼ at $3.81 ½. March soybeans closed up 5 at $10.26 ½ and July closed up 4 ¾ at $10.47. March wheat closed down 8 ½ at $4.49 ¼ and July 18 closed down 8 ¼ at $4.78 ¼. Crude oil closed up $.36 at $61.56.

The corn market held mixed feature today. Better early, weaker late. The highs were notched shortly after the “day” open and from there, it was a one way street paved with selling. Corn would finish the day lower, and nearly $.05 below the highs of the day. Despite the softer close, traders still estimate the funds were net buyers today, which would put them net long 20k corn heading into tonight. To no surprise, South American weather was the focus coming out of the long weekend. Needed rain fell on important crop areas from central into north-central Buenos Aires during the holiday weekend, but other major growing areas broadly went without. The next week to ten days are expected to continue a largely dry bias which will maintain pressure on crops. Brazil is having the opposite problem, with too much rain as farmers try to get second crop corn planted. Over the weekend, analysts at Safras pegged the full year Brazilian corn crop at 89.5 mmt, which is significantly behind the USDA’s latest estimate of 95 mmt, and down 16% from last year’s record harvest.

The soybean market opened the overnight session with a gap higher and appeared to be off to the races along with the meal market once again to start the week. Weekend rains in Argentina benefited parts of Buenos Aires as well as some Northern and Western growing areas but the key areas missed out heading into another week of dry conditions. Flat price beans and the spreads weakened throughout the day session and while the close still represents a new 7-month high close, the gap was closed. Cash movement was noted in both old and new crop as futures traded up to 7-month highs and for a moment that was enough to slow our upside momentum. he mid-day weather outlook showed some better chances for light rains for this coming weekend with another chance for relief the following weekend. The trade has been wary of looking out ahead because similar events have been advertised and largely disappointed this growing season. Today’s price action does not qualify as a blow off trade but ‘choppy is toppy’ and perhaps cracks are beginning to surface? Elsewhere in the news, an Argentine farm consultant group saw the Argentine soybean crop at 47 mmt compared to the Buenos Aires Grain Exchange at 50 mmt and USDA last 54 mmt. Many in the trade have been talking 45-47 mmt the past two weeks. Safras increased their Brazilian soybean crop estimated to a record 115.6 mmt vs. 113.9 mmt est. in December which compares to AgRurual at 116.2 mmt and USDA last at 112 mmt.

The wheat complex started the evening a little better and traded as much as $.06-$.07 higher in both Chicago and KC. The buying returned once the day session started, but it was not as strong and not very lasting. The strength across the soy complex, combined with Russian wheat prices firming another $5.00 week over week may have been behind the early strength. However, rain and snow showers across the HRW belt over the past 24 hours quickly put a ka-bosh on any thoughts of an extended rally. There was one system that developed over eastern Colorado and moved easterly, giving nearly the entire state of Kansas some snow cover. There was also a system that moved up from the Gulf that provided central Oklahoma with much needed precip. The US Dollar continuing its reversal after Friday’s price action and trading a point and a half above Friday’s lows was viewed as a negative to the complex as well. All may have played a role in the HRW and SRW wheat contracts’ reversal today and subsequent settle right off its session’s lows. After the close Egypt announced they were in for wheat. It should not be a Russian dominated market anymore. Thursday and Friday will be the grain outlook conference in which we will get an indication on upcoming acreage intentions.

March 17 corn closed down ¼ at $3.67 ½ and July 18 closed down ¼ at $3.82 ¾. March soybeans closed down 2 ¾ at $10.21 ½ and July closed down 2 ½ at $10.42 ¼. March wheat closed down 4 at $4.57 ¾ and July 18 closed down 3 ½ at $4.86 ½. Crude oil closed up $.38 at $62.37.

FOR THE WEEK ENDED 2-16-18

CORN – Not much has changed fundamentally. Traders are still concerned over dryness in Argentina, rain delays in safrinha corn planting, fund short covering, and decent demand for the cheapest corn in the world. The dryness in Argentina has had a bigger impact on soybean prices, but that strength has helped underscore support to corn prices. Rain has somewhat delayed soybean harvest in Brazil, and those acres are waiting to be planted with corn; thus, the underlying corn support. A shrinking Argentine corn crop has also provided support. Large speculators have been taking profits from the net short position they have been carrying for months and have now flipped from net short to net long. While they are not yet net long, their net short position has been cut significantly. US corn is the cheapest source in the world. Weekly export sales reflected this fact with the second biggest weekly export sales number.

Weekly corn export sales were larger than anticipated at 77.7 million bushels. Total commitments at 1.4 billion bushels are 14% behind last year. This is the smallest year/year deficit this marketing year. The USDA is projecting this year’s exports at 2.05 billion bushels, a 10.6% year/year decrease. We need 21.6 million bushels of sales per week to hit the USDA estimate. Last year from this point through the end of the marketing year, we averaged 19.6 million bushels per week.

Weekly ethanol production fell 41,000 bpd to 1.016 million bpd. Stocks were 600,000 lower at 22.9 million barrels. Stocks are still 1.7% higher than last year. Margins were unchanged for the week at a positive 11 cents per gallon. Average gasoline demand over the last four weeks is up 6.5% from last year. The USDA is not expected to increase the corn for ethanol usage line on the March report with production below last year in four of the last seven weeks. Brazil’s first corn crop was 17% harvested as of February 14th versus 15% last

year. Their safrinha corn in the center south was 19% planted compared to 32% last year. Mato Grosso was only 37% planted compared to 54% planted last year. Parana’s corn was just 6% planted versus 23% last year, and MGDS was 7% planted versus 21% last year. The Brazilian ag minister stated their second crop corn planting was delayed slightly, but “everything is going normally.” In Argentina, the BAGE said 58% of their corn crop was damaged by drought, but they left their production estimate unchanged at 39 mmt, the same as the USDA’s estimate. They rated their corn crop at 58% poor/very poor versus 30% two weeks ago, zero percent excellent versus 4% previously, 14% good versus 35% previously, and 28% fair compared to 31% previously.

OUTLOOK: Corn has gleaned strength from good demand of its own, spillover support from soybeans/meal, and fund short covering. Large speculators as of February 13th (the latest commitment of traders’ report) showed they are now carrying a net long position of 11,000 contracts. Further upside may be limited by ample US supplies still to be priced by growers. How South American weather shapes up will be a major factor in overall direction. Due to President’s Day, the markets are closed during the day on February 19th. The night open could be wild, but the direction is unknown. For the week, March corn closed 5 ½ cents higher at $3.67 ½, July was up 5 ¼ cents at $3.82 ¾, and December corn gained 4 ¾ cents to settle at $3.97 per bushel. The USDA Ag Forum will be held February 22-23. March options expire February 23rd. China is on their Lunar Year holiday until February 22 to celebrate the Year of the Dog.

SOYBEANS – The next leg up began on Monday, despite the announced cancellation of 455 tmt of beans to China. Funds have turned their net short position into a net long on disappointing rainfall in Argentina. Crop production forecasts for Argentina have been declining. Last week, the USDA cut their outlook to 54 mmt, which is likely the highest estimate out there. Argentina is the world’s largest exporter of meal. With meal buyers caught short, the meal market has taken the lead in the upswing in soybean prices. Nearby meal rallied to its highest price since July 2016. There will come a time when we have priced in Argentina’s lower bean production, and lower meal availability, but we haven’t hit it yet. March soymeal closed higher for 8 sessions in a row, before finally breaking it heading into the weekend. It also set fresh contract highs for 5 consecutive sessions.

Some traders are leaning toward an Argentine soybean crop of 47 mmt versus the latest USDA forecast of 54 mmt. The Rosario Grain Exchange believes their soybean production may be capped at 50 mmt. The Buenos Aires Grain Exchange left their Argentine soybean crop forecast at 50 mmt, after saying 56% of the crop had been damaged by drought. The BAGE rated their soybeans in the good/excellent category at 11% versus 25% two weeks ago, 33% fair vs. 41% previously, and 56% poor/very poor compared to 37.6% in their last report. They indicated 75% of the crop is blooming, well behind the 85% average and 46% are setting pods versus 57% on average. Trying to translate this into how it may affect US meal exports is a riddle. If Argentine meal supplies become tight, Brazil is likely next in line to be the world’s supplier, then Paraguay. The US is considered a residual exporter of meal. The critical pod filling stage for most of Argentina’s soybeans is still ahead. Safras and Mercado pegged Brazil’s soybean harvest at 9% complete versus the average of 13%. The main production region of Mato Grosso was 29% harvested versus 28% on average. Parana was barely started at 2% complete versus 17% average and RGDS had not started versus 16% complete on average. Safras and Mercado continue to peg Brazil’s soybean crop at 114.6 mmt. The USDA is at 112 mmt. Brazil’s ag minster said they could see a repeat of last year’s record 114.1 mmt soybean crop.

Weekly export sales were at the high end of expectations at 23.5 million bushels. This keeps us at 13% behind last year’s total commitments. With total commitments of 1.6 billion bushels, we need to average a record 16.5 million bushels of sales per week to hit the USDA 2.1-billion-bushel target. Last year from now through the balance of the marketing year, we averaged just 11.1 million bushels per week. The USDA export target equates to a 3.4% decline in year/year exports. Next week’s sales may be disappointing as well with China on Lunar New Year holiday until February 22nd. Total export commitments to China are 26.6 mmt versus 33.8 mmt last year at this time. The US has placed anti-dumping duties on Chinese pipe-fittings. This is in addition to duties on washing machines and solar panel.

OUTLOOK: March soybeans pierced the December $10.27 per bushel high this week, but were unable to close above it. If Argentina gets a soaking rain in the next couple of weeks, all bets are off. March soybeans closed higher in 4 out of the 5 trading sessions this week, fading on Friday on pre-holiday profit taking. March beans rallied a very impressive 38 ½ cents this week to settle at $10.21 ½, July soared 38 ¾ cents to $10.42 ¼, and November beans closed 22 cents higher at $10.11 per bushel. November soybeans came within a nickel of their $10.28 ¾ contract high. March meal hit a contract high of $379.30 before closing $29.50 higher for the week at $373.30 per ton. Meal broke its string of 8 consecutive higher sessions before easing back into the weekend. As goes meal, so goes soybeans.

WHEAT – Russia looks to export just over 36 million tons of wheat this year. They are now the world’s leading wheat exporter. The last time someone shipped that much wheat was the US doing it in 92/93. The main focus of traders is the weather in the southern plains. It continues to be very dry and some private forecasters are decreasing their winter wheat crop estimates.

March 17 corn closed up ½ at $3.67 ¾ and July 18 closed up ½ at $3.83. March soybeans closed up 7 at $10.24 ¼ and July closed up 7 ¼ at $10.44 ¾. March wheat closed up 6 at $4.61 ¾ and July 18 closed up 6 ¼ at $4.90. Crude oil closed up $.66 at $61.17.

The corn market kept them yawning with another “slightly higher” finish today. Most of the intraday excitement was again reserved for soy and wheat. Heading into Friday, corn is sporting $.06 gains for the week, all but a penny of which was scored Monday. Managed Money funds were estimated net buyers of about 5,000 corn today, which would leave them net short about 45,000 futures and options. CFTC tomorrow night should be interesting, as buying of late has tended to greatly exceed estimates. Another strong weekly export sales report easily beat heightened expectations for corn. For the fifth consecutive week, new corn sales topped 1.4 mmt, and in fact, posted the second highest level of the 17/18 marketing year at 1.974 mmt. Japan and “Unknown” accounted for nearly half of total sales, with other traditional buyers (Mex, Colombia, Saudis) making up the balance. The red hot pace of late has narrowed the yr/yr gap between sales + ship to 36 mmt vs. 42 mmt this time last year.

We are heading into another weather weekend. Markets will be closed Monday for holiday, re-opening that night. Argentina weather remained dry, as expected, coming into today, with mercury rising another notch. The next week is expected to bring some limited rains to Argentina, but it is expected to be light and somewhat spotty, potentially missing some of the driest areas. There are better odds looking into early March, but it remains to be seen if that will be too little, too late. The weekly condition report suggested up to 58% of the country’s corn crop had been damaged by drought, but the trade remains more concerned about what will happen to soy product exports out of there.

The soybean market remains supported by the meal market which is a special situation. Crop conditions in Argentina continue to deteriorate and the forecasts don’t show any significant relief over the near term so the uncertainty on soybean production and reduced crush for the world’s number one exporter of meal has sent the market into orbit. Short bought commercial meal users have been forced to scramble and funds are compounding the issue by piling in on the long side of the market. Until we see a change in the weather outlook in Argentina if not actual verification of a pattern change production estimates will continue to decline.

Soybean export sales totaled 837 mt (640 old crop) and slightly better than trade expectations. Old crop sales were down 4% from last week and down 8% from the four week avg. Buyers of note include China (157 all moved from previously announced unknown sales and a 73 tmt cancellation). This is the third report in a row to include Chinese cancellations but the recent 455 mt cancellation was not included this week.

Overnight, the wheat complex battled both sides of unchanged early, but over the latter half of the evening, trade turned a little better. Mpls and KC led the complex, but Chicago was not too far behind. Moving into the day session, the Chicago market struggled to find any footing, By late morning the trend in Chicago reversed, and prices gradually firmed the rest of the day. The complex made its highs late in the session before settling a couple cents off those highs. With the raising of wheat margins now behind us (usually a negative to trade), and the market seemingly now done battling through a poor close after Tuesday’s session, trade’s main focus once again is back to weather. Next week at the outlook conference we will get an indication on acreage, but that data has taken on less importance over the past few years. This morning NOAA updated its drought monitor and outlook and nothing has changed. HRW wheat country is still very dry. Conditions across the HRW wheat belt will take on more significance over the coming four to six weeks. Export sales this morning was very similar to last week, coming in 311 MT with an additional 111 MT of new crop for a combined total of 422 MT. Total sales to date are 776 mil bu vs 879 mil bu last year.

March 17 corn closed up ½ at $3.67 ¼ and July 18 closed up ½ at $3.82 ½. March soybeans closed up 5 ½ at $10.17 ¼ and July closed up 5 ½ at $10.37 ½. March wheat closed down 5 at $4.55 ¾ and July 18 closed down 2 at $4.83 ¾. Crude oil closed up $1.48 at $60.51.

The corn market had several excuses to stimulate some excitement today, but just couldn’t decide which story to follow – the continued bull run in meal or the gap lower in wheat. Corn finished fractionally higher in the end, right in the middle of an intraday range. Volumes were much lower than levels observed recently. Managed Money traders were viewed net buyers of about 5,000 contracts, which would put them net short just under 50,000 futures and options. The lack of enthusiasm in corn probably shouldn’t be too difficult to understand, given a second day nearly devoid of any market-moving corn news. The markets remain a little jittery about dry Argentine weather, but as noted here, the story is unfolding more over in meal. Argy is a much more essential player in world soy product trade relative to corn. There is potential for some locally greater rainfall into the weekend, but this rain is expected to be mostly confined to the west and north, which has not been as dry. Most private Argy corn production estimates are at least 10% below levels predicted earlier this year. Fortunately, Brazil has been in much better shape, though second season corn planting is running a little behind average.

The weekly EIA report proved quite friendly for ethanol, allowing the market to erase two weeks worth of lower corrective action. Traders feel the report had a strong weather-tinge, as a resurgence of cold weather likely tamped down production efficiencies a notch. Indeed, they declined 4% wk/wk, and would utilize 5.45 billion bushels of “just corn” over an entire marketing year. Strong demand (particularly of the export variety) helped stocks see a draw off nearly record-high levels.

The soybean market was able to shrug off modest overnight sell pressure to bounce back and resume the rally into new highs. The rally continues to be led by meal. There was not a lot of news around today and trade volumes were light. For the soy complex, a mostly dry outlook for Argentina’s prime production areas is enough to keep the rally chuggin’ ahead. The forecast isn’t completely dry but with only limited rains and temps heating up again conditions are very stressful. Until we see a change in the weather outlook if not actual verification of a pattern change production estimates will continue to decline and the rallies should remain intact.

Chicago wheat had a gap lower start to trade, and the entire wheat complex saw defensive price action through much of the night. Mpls battled through the rough start to the night and finished the best, but it also had the poorest performance of the complex on Tuesday. The wheat markets weaker overnight price action should not have come as too much of a surprise after Tuesday’s price action which saw SRW wheat futures rally into new highs for the move, but was unable to sustain that momentum throughout the day before ultimately finishing lower. The lower closer close was technically bad. There have been three other times the Chicago March wheat contract traded into a new high for a move only to finish the day lower, and on each occasion, the following day saw defensive price action. The CME threw another wrinkle into the dynamic of trade after the close Tuesday, raising wheat margins $50, from $950 to $1,000. Remember, raising margins is usually done for a reason – to slow down the movement of trade – and thus is usually negative to price action.

So, the wheat complex had to fend off a couple pieces of negative data to start the day, and it did a good job initially. Chicago was able to close the gap left from the start of the overnight, but soon thereafter reversed and hovered in the lower end of its trading range the rest of the morning. Since the overnight lows held, it sure felt like we had the expected scale down buying under $4.55, giving some support on the break.

The scale down buying support could have come from a couple areas. First, outside of the ebb and flow of the US Dollar, the grain markets, and the wheat complex in general, has mostly distanced itself from following economic news. But with inflationary talks on the rise, and the stock market finally correcting, we seem to be finding some funds moving away from stocks and into commodities again. This morning’s economic data just reiterates the inflationary worries. Should those worries continue, it will eventually be supportive to grains. Also, weather continues to be closely watched. On Tuesday, some wanted to talk up the 6 to 10 day and 8 to 14 day maps increasing the chances for much needed precip over HRW wheat country. However, for now, the maps only look to possibly bring some relief to the eastern half of the HRW wheat belt. SW Kansas and Oklahoma and western Texas looks to remain dry.

As hard as it may be to believe, we are nearly halfway through February and about 2 months away from planting season. Before we know it, green grass and the spring rush will be here.

Top-dressing wheat will likely begin in the next few weeks. For 100 bushel wheat we are removing 150lbs/acre of nitrogen and 10 lbs/acre of sulfur. I encourage growers to add a sulfur fertilizer source to help maintain higher yield levels. Plant tissue samples can be taken to assess fertility needs in season as well.

Our Wheat Health Program for 2018 has been released and is available to sign up for. When you sign up for the program there are special deals on Prosaro fungicide and Grizzly Too insecticide. Prosaro is used to protect your wheat from head scab and the flag leaf from diseases. Head Scab will increase DON levels in wheat and reduces yield. The flag leaf is responsible for a large percentage of wheat yield.

Stay safe and talk with your Mercer Landmark Agronomist to get signed up for our Plant Health Program and for all of your other agronomic needs.

March 17 corn closed up 5 at $3.67 and July 18 closed up 5 at $3.82 ½. March soybeans closed up 18 ¾ at $10.01 ¾ and July closed up 18 ½ at $10.22. March wheat closed up 15 at $4.64 and July 18 closed up 14 ¾ at $4.89 ½. Crude oil closed up $.09 at $59.08.

Corn managed to maintain this strength into the day. Futures closed right at the highs of the day, boasting $.05 gains and coming within a freckle of taking out the recent post-report spike trade. Managed Money funds were viewed net buyers of 20,000 corn today, and when factoring in the most recent CFTC surprise, would imply they are only 50,000 net short corn.

Argentina was the subject, as weekend rains generally fell short of expectations. A cool down into Sunday may have helped a little, but a soaker is what is needed, and that did not happen. There are some more showers in the forecast for the weekend, but they are expected to also fall short of the mark for most. Most expect a turn to better conditions into March, but some permanent damage is expected between now and then. Before getting too revved up, keep in mind that Argentina is a “residual” supplier of corn to the world. Losing a few million metric tons there is not a game-changer, but no doubt could help US exporters win some more business. South Korea dived into the world corn markets overnight after passing on a tender last week. They cited high prices at the time, but ended up paying close to $10/mt more than they would have originally.

Elsewhere, Brazil weather remains mostly good. Farmers appear to be dancing around intermittent rains to get first crop corn harvested and second crop corn planted. Recent soil moisture increases in the Gulf of Mexico coast states has improved planting moisture for corn that will begin soon. China soil moisture is also good for early corn planting to begin next month. The heart of the Corn Belt received big snows over the weekend which will help their situation, too.

The soybean market rallied sharply on Argentina weather or more specifically, disappointment in the weekend rain event – gapping higher in the overnight, closing that gap midday, and firming back near the highs into the close for the biggest one-day rally on March beans since the October 12th crop report. Meal is the leader due to Argentina’s position as the global leader in meal exports, it also gapped higher on the chart but never came close to closing that gap like beans did. Beans slipped some due to a midday outlook suggesting better rains for the upcoming weekend along with some farmer selling with beans challenging their January highs although the farm selling wasn’t nearly as active in beans as the corn selling was. The trade had been talking the Argentine bean crop size of 50-52 mmt in recent weeks compared to the USDA latest at 54 mmt assuming we got some better relief over the weekend. Now, estimates are slipping to the 45-46 mmt range weather pending. Obviously, things are trending the wrong way in Argentina and widespread rains are needed to help stabilize production potential. Fortunately, Brazil still appears on track for record or near record production.

The story of US soybean demand is one where crush demand is rising and maxing out in order to produce meal but this is not enough to counter waning soybean export demand which has been disappointing due to a low protein US crop, competitive Brazilian supply and an outlook that is likely to get worse before it gets better. In the news, China cancelled 455 mt of US bean purchases in another sign of potential trade retaliation but the fact is they can replace those purchases with cheaper new crop Brazilian beans that don’t appear to have the protein deficit of the US crop. This is a normal seasonal transition so the timing is optimal to rattle sabers with minimal real-world impact on trade or risk. The USDA did announce new sales of 198 mt old crop and 116 mt new crop to unknown.

After a couple days of trading the crop report data, the wheat markets, and the entire grain complex in general, is back to trading weather. Argentine rains seemed to miss the southern region of that country, sending beans and meal racing higher overnight. For wheat, the negative slant that the crop report data gave us on Thursday, combined with 6 to 10 day and 8 to 14 day maps showing much above precip expected across much of HRW wheat country was enough to help settle futures $.15 off its highs on Friday. However, we saw little moisture this past weekend across the HRW wheat belt. That gave a positive slant to trade for the weather bull. As World wheat prices continue to rise, it is almost a given that US wheat futures will follow along. And we still have a large spec in Chicago that holds a significant short. Many positive spins to a wheat complex today, in which any or all could have been behind today’s strength. Looking forward, depending on how much precip the HRW wheat belt receives this week – or if the rains from the 6 to 10 day and 8 to 14 day even materialize, may go a long way in determining if this early week rally was a wonderful selling opportunity, or just the beginning of another leg up.

March 17 corn closed down ¼ at $3.61 ½ and July 18 closed down ½ at $3.77 ¼. March soybeans closed down 6 ¼ at $9.78 ¾ and July closed down 6 ¼ at $9.99 ¾. March wheat closed down 4 ¼ at $4.46 ¾ and July 18 closed down 4 ½ at $4.73 ½. Crude oil closed down $.52 at $65.03.

I am going to be out of the office February 5th-9th so there will be market commentary.

Highlights

· The US dollar index was higher today, up 0.510 points at 89.181.

· The DJIA was lower today, down 522 points to 26,663.

· The next USDA WASDE report is scheduled for Thursday, February 8th

Corn

The corn market closed slightly lower today pressured by improving weather in South America, while daily exports and good weekly export numbers provided underlying support. Traders expect the USDA supply and demand report Thursday to show a lower US corn carryout due to higher feed usage and higher ethanol production. Informa estimated the Argentine corn crop at 37 million metric tons, 5 million tonnes lower than previously estimated, and the Brazilian corn crop at 88 million metric tons. Currently the USDA has Argentina’s corn crop at 42 mmt and Brazil at 95 mmt. The March corn contract sees resistance at $3.62 ½ and $3.65 ¼, with support at $3.57 ¼ -$3.54 ¾. Private exporters reported to the USDA export sales of 195,000 metric tons of corn to unknown destinations for the 2017-2018 marketing year. Exporters also sold 170,000 metric tons of corn to Egypt for the 2017-2018 marketing year. In general, corn and soybean basis at interior processors and end users in the US Midwest were flat today as farmer sales are slow after active farmer selling took place in the first half of the week

Oilseeds

The soybean market traded lower today on technical selling and rain forecasts for South America over the weekend and again at the end of next week. On Thursday traders expect a higher bean carry out, because of lower export numbers, an increase in Brazilian production and a decrease in Argentine production, to be reported by the USDA. March soybeans sees support at 9.76 ¾, with resistance at the $10.00 mark once again. Private exporters sold 108,860 metric tons of soybeans to Mexico for delivery in the 2017-2018 marketing year. Weather in Argentina is expected to be hot and dry for the 1-5 day forecast, but trending wetter in the 6-10 day forecast and the 16-30 day forecast as well. Brazil is looking the opposite with the nearby forecasts wetter and 16-30 day deferred forecasts looking drier. Informa pegged the Argentine soybean crop at 51 million metric tons, 3.5 million tonnes less than the last estimate, and the Brazilian soybean crop at 112.5 million metric tons. USDA currently has Argentine soybean production at 56 million tonnes and Brazilian production at 110 million tonnes.

Wheat

Wheat markets traded lower today as snow is expected to fall in some soft winter wheat areas, providing snow cover to protect the crop as well as moisture. Dryness in hard red winter wheat country gave support to the Kansas City market. In the USDA report Thursday, traders expect US wheat acres to be lower, mainly due to lower hard red winter wheat acres, and higher Canadian and Argentinian production. Russian wheat exports, for the 2017-2018 marketing year, are poised to increase again, aided by warm weather and very few storms to disrupt logistics. Previous estimates pegged the maximum export activity for Russia at 45 million metric tons of wheat, but now analysts have said they expect it to be more than that, with many predicting around 47 mmt, but some saying it could be as much as 50 mmt. Year to date Russia has exported 29.8 mmt of wheat, up 35% from last year at this time. Chicago wheat sees resistance at $4.51 ¾ and $4.58 ¾, with support at $4.42 ½ and $4.32 ¾. Egypt’s state grain buyer, GASC, bought 180,000 metric tons of wheat from Russia in their tender today. Trade expectations for All Wheat Stocks in the SatsCan December 31, 2017 Grain Stocks report on Monday are 23.9 million metric tons of wheat, compared to 24.095 on December 31, 2016. Informa pegged hard red winter wheat acres planted at 23 million, with 17.6 million harvested, 39.1 bushels per acre, and 687 million bushels of production. They estimate soft red winter wheat planting at 5.98 million acres, 4.858 million acres harvested, 66.3 bushels per acre and production at 322 million bushels.

March 17 corn closed up ¼ at $3.61 ¾ and July 18 closed up ½ at $3.77 ¾. March soybeans closed down 10 ¾ at $9.85 and July closed down 10 ¼ at $10.06. March wheat closed down ¾ at $4.51 and July 18 closed down 1 at $4.78. Crude oil closed up $.99 at $65.55.

Corn made another brave stab at a correction today, though much like Wed, the bear was unable to stick the landing. Corn finished fractionally better, very nearly posting an outside day reversal higher on the daily chart. Managed Money traders were viewed net buyers of 5,000 corn today, which would leave them short close to 190,000 corn futures and options. CFTC report tomorrow night could offer surprises, given the “two sided” fund activity seen of late. Ideas of an early end to Argentina’s ridge applied some pressure to the markets early in the morning. Make no mistake, stress will be serious over the next week, with temperature extremes getting well over 100 degrees Fahrenheit for multiple days. Better rainfall and greater cooling in the week of Feb.12 will offer pockets of some improvement, though. The most recent report from exchanges in the country suggest planting is complete. Early planted corn (which is one-third tasseled) is 28% G-E and 39% P-VP, while the late-planted stuff is 50% G-E and 21% P-VP. Brazil remains in much better shape overall, though overall production potentials will still depend on how many safrinha acres end up getting planted. Time will tell there.

Back at home, export sales were quite strong for corn for a third week running. Net new corn sales of 1,850,600 MT for 17/18 were up 28% from the prior week. One-quarter of the business went to unknown, along with usual suspects Mexico, Japan, Colombia, and South Korea. Shipments for the week were a marketing year high, surprisingly enough, which is probably more of an indictment on how awful the export pace has been to date. The report takes total sold + shipped to 32.25 mmt for the current marketing year versus 40.25 mmt in the year ago period.

The soybean market continued to ease off it recent highs as an improved weather forecast for Argentina has been noticed. The mid-day GFS model reduced the rains in the second week of the forecast for Argentina. There is still rain showing but totals were reduced as the model continues to oscillate. Weekly export sales report fell short of expectations for soybeans. The meal and oil exports both came in well above trade estimates at 468 mt and 59 mt respectively. Soybean exports totaled just 410 mt (359 old crop) which was a disappointment relative to even modest trade expectations. Sales were -42% from a week ago and -50% from the 4-week avg. Buyers of note include China (457 including 198 moved from prev. announced unknown sales and a -126 tmt cancellation). Soybean sales on the books trail last year’s pace by -46 mb while soybean shipments trail last year’s pace by a whopping -203 mb. The USDA currently is projecting sales to come up short of last year by -14 mb. The seasonal window for stronger US export trade is closing as Brazilian harvest advances.

Price action throughout the night saw Mpls trading much better than Chicago or KC, and that trend continued throughout the day. Mpls would finish the day almost a nickel higher, but once again the KC market was the star of the show. Trade in the HRW wheat contract saw an impressive finish to the day, settling $.10 off its early lows. In Chicago wheat had a solid day today as well, despite its slightly lower finish, as it settled $.08 off its lows. Weather may have been partly responsible for the overnight and early weakness as light showers showed on radar screens across northern Kansas this morning. But trade continues to show its resiliency, finishing the day strong. Egypt’s GASC announced after the close they were in for wheat for the March 5th thru 15th time frame. Their last purchase was back on January 16 when they bought five cargoes of Russian. Average freight for the Russian wheat was $.85 cheaper than their previous tender. The USDA weekly export sales report this morning was expected to show a week of sales similar to last week, but the data was a little disappointing as sales came in at only 289 MT. Total sales to date are 750 MB vs 841 MB last year.